Qualcomm: In-Car, Wearables, TV Aside, Core Strength Remains Mobile

Jefferies Equity Research analysts Peter Misek, Billy Kim and Jason North rate Qualcomm, Inc. (NASDAQ:QCOM) as a Buy as the company’s CES product announcements have focused on ancillary opportunities.

Qualcomm, Inc. (NASDAQ:QCOM)’s CES product announcements have focused on ancillary opportunities like wearables, TVs, set-top boxes, in-car infotainment systems, and the connected home. We think these are interesting opportunities but continue to see 2014 upside to be mainly driven by the core mobile business.

Snapdragon 802 designed for Ultra HD Smart TVs

The SoC is designed to power smart Ultra HDTVs, set-top boxes, and digital media adapters. The Snapdragon 802 enables Ultra HD video content and “console-quality” gaming. The SoC includes a custom Android Software Framework based on Kit Kat. The Snapdragon 802 is a 1.8 GHz quad core processor with an Adreno 330 GPU. The Qualcomm Technologies’ Hollywood Quality Video (HQV) allows for 1080p video to be up-scaled to almost Ultra HD. The SoC also includes WiFi 802.11ac. We believe the opportunity could be substantial if 4K TVs prices decrease significantly.

Snapdragon 602A for connected in-car infotainment system

Qualcomm, Inc. (NASDAQ:QCOM) introduced the Snapdragon 602A which features a quad core Krait processor, Adreno 320 GPU, and is pre-integrated with Qualcomm Gobi 9×15 multimode baseband, WiFi 802.11ac, and Bluetooth LE 4.0. The processor is designed to power in-car infotainment systems for 3D navigation, facial, gesture and voice recognition, and rear seat 3D gaming. The Snapdragon Automotive Solutions come with Android and QNX platform support. We find the multiconnectivity support to be attractive as drivers/passengers will be able to connect and interact with the car using their mobile devices in various ways.

Qualcomm’s Smart Gateway platform

The new platform will combine the new Qualcomm Internet Processor (IPQ), Gigabit WiFi (802.11ac), and StreamBoost bandwidth manager. The Smart Gateway Platform is intended to improve digital user experience such as content delivery, bandwidth optimization, security, and parental controls. Additionally, Qualcomm, Inc. (NASDAQ:QCOM) announced the commercial availability of the previously announced AllPlay smart media platform. AllPlay allows for users to stream music across the home wirelessly to devices that have adopted the AllPlay audio module. We believe the connected home market will become an increasingly important addressable market; however, Apple is currently well-positioned with its AirPlay.

ARM servers are a potential opportunity

Echoing comments Jacobs made 18 months ago, Qualcomm, Inc. (NASDAQ:QCOM) CEO Steve Mollenkopf said, “It’s an interesting opportunity for us, because the assets you need to develop to be a leader in mobile — GPUs, CPUs and low-power designs — set you up for [the server market] as well. To be clear, I didn’t mention that we had any announced products for servers, but it is interesting that we have the capability to go into something like that.”

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